Google to buy Nest for $3.2 billion in cash

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The Nest smoke and carbon monoxide alarm is shown at the company's offices on Tuesday, Oct. 1, 2013, in Palo Alto, Calif. Tony Fadell, a gadget guru who helped design the iPod and original iPhone while working at Apple, is counting on his latest innovation to prove that a smoke detector can be sleek, smart and appreciated. (AP Photo/Marcio Jose Sanchez)

The soon to be released Nest smoke and carbon monoxide alarm sits in front of Nest founder and CEO Tony Fadell as he talks about his company in their offices in Palo Alto, Calif., on Tuesday, Oct. 15, 2013. (Nhat V. Meyer/Bay Area News Group)

MOUNTAIN VIEW — Google (GOOG) announced Monday that it will spend $3.2 billion for Nest, a Silicon Valley company founded by former Apple (AAPL) employees to develop better versions of common devices for homes.

“Nest’s founders, Tony Fadell and Matt Rogers, have built a tremendous team that we are excited to welcome into the Google family,” Google CEO and cofounder Larry Page said in Monday’s news release.

Palo Alto-based Nest last year introduced a connected smoke detector to its product line, which previously included a thermostat originally launched in late 2011. At Apple, Fadell and Rogers led teams that created the iPod and the iPhone, and Nest had received backing from Google’s venture capital arm as well as Kleiner Perkins Caufield & Byers.

“Google will help us fully realize our vision of the conscious home and allow us to change the world faster than we ever could if we continued to go it alone,” Nest CEO Fadell said in a blog post. “We’ve had great momentum, but this is a rocket ship.”

Nest will continue to operate as a stand-alone company with Fadell at the helm, Google announced Monday, with the deal expected to close in the next few months.

In a Q&A blog post, Rogers — now the company’s vice president of engineering — said that Nest would continue to support Apple’s iOS mobile operating system as well as all Web browsers, but mentioned a future where Nest uses Google products in new ways.

“I’m betting that there’s a lot of cool stuff we could do together,” Rogers wrote.

The Nest acquisition gives Google a foothold in one arena of the “Internet of Things,” the growing phenomenon of connecting ordinary items to the Internet. Silicon Valley tech giants are laser-focused on the opportunity for growth in the field, with Cisco (CSCO) CEO John Chambers saying at CES this month that it represents a $19 trillion opportunity.

“This will be potentially the biggest business opportunity in the history of people,” Janusz Bryzek, a vice president at San Jose-based Fairchild Semiconductor, told the Mercury News about the Internet of Things last month. “We are changing the Earth.”

Google claimed to have $56.5 billion in cash and convertible cash equivalents as of Sept. 30, 2013, in the Mountain View search giant’s most recent quarterly earnings report with the Securities and Exchange Commission. The company’s stock dropped 0.6 percent to $1,122.98 Monday after reaching all-time highs of more than $1,140 a share last week; the stock gained slightly in after-hours trades following the announcement of the acquisition, topping $1,130.

LH Shoreline, an affiliate of Stockbridge Capital Group, has bought the Google-rented building at 1001 N. Shoreline Blvd. in Mountain View for $169.9 million, according to Santa Clara County property records.